WDIS v. Hi-Country Estates

2022 UT 17IN THE
SUPREME COURT OF THE STATE OF UTAH
WDIS, LLC as Trustee of the MDMG TRUST, Dated April 25, 2016, and
DREAMWORKS PROPERTY MANAGEMENT, INC. as Trustee of the STEP
MOUNTAIN ROAD LAND TRUST, Dated November 6, 2007,
Appellants,
v.
HI-COUNTRY ESTATES HOMEOWNERS ASSOCIATION, PHASE II,
Appellee.
No. 20200849
Heard February 9, 2022
Filed April 28, 2022
On Appeal of Interlocutory Order
Third District, Salt Lake
The Honorable Laura S. Scott
No. 160904994,
(consolidated with Nos. 170903466, 170904171, 190909656)
Attorneys:
Troy L. Booher, Beth E. Kennedy, Taylor P. Webb, Bruce R. Baird,
Salt Lake City, Landon A. Allred, South Jordan, for appellants
Stephen T. Hester, Bradley M. Strassberg, Salt Lake City, for appellee
CHIEF JUSTICE DURRANT authored the opinion of the Court, in which
JUSTICE PEARCE, JUSTICE PETERSEN, JUDGE MORTENSEN, and
JUDGE TENNEY joined.
Having recused themselves, ASSOCIATE CHIEF JUSTICE LEE and
JUSTICE HIMONAS do not participate herein;
COURT OF APPEALS JUDGE DAVID N. MORTENSEN and
COURT OF APPEALS JUDGE RYAN D. TENNEY sat.
CHIEF JUSTICE DURRANT, opinion of the Court:
WDIS v. HI-COUNTRY ESTATES
Opinion of the Court
Introduction
¶1 In 1973, Charles Lewton signed and recorded documents
purporting to create a homeowners association covering 2,000 acres
of land near rural Herriman, Utah. He sought to make that land
subject to various restrictive covenants. Years later, a group of
landowners (the Landowners) purchased properties within the
HOA‘s boundaries. But in 2015, during a protracted dispute over the
Landowners‘ attempts to develop their property, they discovered
that Mr. Lewton had owned just a single eight-acre parcel of the
2,000 acres he purported to include within the HOA, and no other
landowners had signed the recorded documents.
¶2 Based upon this information, the Landowners sued to quiet
title to their property. They filed a motion for summary judgment,
arguing that the HOA and its subsequently amended restrictive
covenants were void ab initio (from the beginning) based on a public
policy invalidating covenants not signed by the affected landowner.
The district court denied the motion, and the Landowners appealed.
On appeal, the Landowners argue the covenants must be declared
absolutely void under the test established in Ockey v. Lehmer1
because they violate public policy as articulated in the Wrongful
Lien Act (WLA), the statute of frauds, and Utah caselaw. But because
these authorities do not evince the public policy the Landowners
suggest, we affirm the district court‘s decision.
Background
¶3 The Hi-Country Estates Homeowners Association, Phase II
(the HOA), encompasses approximately 2,000 acres of land near
Herriman, Utah. The HOA was established in 1973, and, sometime
thereafter, the Landowners began purchasing property within its
boundaries.2
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1 2008 UT 37, 189 P.3d 51.
2 The Landowners are: (i) WDIS, LLC, as Trustee for the MDMG
Trust, dated April 25, 2016; (ii) Dreamworks Property Management,
Inc., as Trustee of the Step Mountain Road Land Trust, dated
November 6, 2007; (iii) Tanaka, LLC; (iv) Brandon Frank; (v) SMR,
LLC as trustee of the 64K Trust, dated January 15, 2015; the CA
Trust, dated January 5, 2015; the SB Trust, dated December 29, 2014;
the E-36 Trust, dated July 15, 2015; the LR Trust, dated January 22,
(continued . . .)
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¶4 Eventually, the Landowners attempted to develop their
properties. But they claim they have been prevented from doing so
because the HOA refuses to provide the necessary infrastructure.
This has led to years of litigation between the Landowners and the
HOA, beginning with a derivative suit brought by the Landowners
in 2009, alleging that the HOA did not treat all lot owners equally.
We reversed the district court‘s dismissal of that case in Hi-Country
Property Rights Group v. Emmer.3
¶5 Later, in 2015, the Landowners obtained documents that they
argue prove ―serious problems with the validity of the HOA‘s
governing documents.‖ They discovered that the HOA‘s governing
documents, including various restrictive covenants, were signed and
recorded by Charles Lewton, who owned a mere eight of the two
thousand acres (0.4%) he sought to include within the boundaries of
the HOA. The covenants lacked the signature of any other
landowner, and there are apparently no other documents in which
the other landowners authorized the HOA covenants to be recorded
on their properties.
¶6 The covenants were amended in 1980, changing the
boundaries of the HOA. These amendments were signed by three
members of the HOA‘s board, professedly ―in response to the wishes
of the majority of the Association Members during the Annual
Membership Meeting.‖ But, as with the original covenants, there is
apparently no written document signed by the owners of the
affected properties authorizing the 1980 amendments.
¶7 After learning this information, the Landowners sued the
HOA to quiet title to their properties. (One Landowner, WDIS, also
purchased nine more parcels.) Once again, we reversed the district
court‘s dismissal of the case, remanding for the district court ―to
determine whether the HOA‘s encumbrances are void or voidable.‖4
¶8 Upon remand, the district court consolidated the case with
several others in which the HOA sought to enforce certain
assessments it had levied against the Landowners. The Landowners
2015; and the LAM 5 Trust, dated February 2, 2015; (vi) J&S Property
Ventures, LLC; and (vii) Step Mountain, LLC.
3 2013 UT 33, ¶ 12, 304 P.3d 851.
4See WDIS, LLC v. Hi-Country Ests. Homeowners Ass’n, 2019 UT 45,
¶¶ 59–60, 449 P.3d 171.
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WDIS v. HI-COUNTRY ESTATES
Opinion of the Court
filed an amended complaint to quiet title and then filed the motion
for summary judgment that we review in this case.
¶9 As exhibits to their summary judgment motion, the
Landowners attached evidence that the individuals who signed the
covenants in 1973 and 1980 did not own most of the land they
sought to restrict, including the properties now owned by the
Landowners. They argued that the restrictive covenants were void
ab initio and therefore incapable of ratification. They based their
argument on public policy reflected in such authority as the WLA,
the statute of frauds, and Utah caselaw.
¶10 The district court denied the Landowners‘ motion, applying
the two-factor test we set forth in Ockey v. Lehmer, which directs
courts to examine (1) whether the law has already declared the type
of contract at issue to be ―absolutely void as against public policy‖
and (2) whether such contract harms the general public.5 As to the
first factor, the district court disagreed with the Landowners that the
WLA and the statute of frauds evinced a clear public policy against
the covenants. And as to the second factor, the court found that the
covenants potentially harmed only the landowners within the
HOA‘s purported jurisdiction and not the public as a whole.6
¶11 The Landowners‘ summary judgment motion having been
denied, the case is set to proceed to trial. We agreed to consider the
Landowners‘ interlocutory appeal. We have jurisdiction pursuant to
Utah Code § 78A-3-102(3)(j).
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5 2008 UT 37, ¶ 24, 189 P.3d 51; see also Wittingham, LLC v. TNE
Ltd. P’ship, 2020 UT 49, ¶¶ 24–25, 469 P.3d 1035 (rearticulating and
applying the two Ockey factors).
6 The HOA opposed the motion, in part, on the ground that the
Landowners had ratified the covenants. The district court declined to
decide the motion on such grounds. As the court pointed out, ―the
HOA did not file a cross motion for summary judgment on
ratification‖ and there were ―disputed material facts‖ regarding the
issue. Similarly, we do not consider the arguments the HOA makes
on appeal that relate to whether the Landowners ratified the
covenants.
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Standard of Review
¶12 ―On interlocutory appeal, we review grants and denials of
summary judgment for correctness.‖7 Summary judgment is
appropriate ―if there are no genuine issues of material fact and the
moving party is entitled to judgment as a matter of law.‖8 ―We view
the facts and indulge reasonable inferences in the light most
favorable to [the HOA], the nonmoving party.‖9
Analysis
¶13 The Landowners argue that because the restrictive covenants
in this case were not signed by the affected property owners, they
are void ab initio. We disagree and affirm the district court‘s
decision.
I. The Restrictive Covenants Are Voidable, Not Void Ab Initio
¶14 In Ockey v. Lehmer, we were asked to determine whether a
conveyance of an interest in property was void ab initio or merely
voidable where the transferors lacked authority to convey the
property.10 We explained that the ―distinction between void and
voidable is important‖ because a ―contract or a deed that is void
cannot be ratified or accepted, and anyone can attack its validity in
court. In contrast, a contract or deed that is voidable may be ratified
at the election of the injured party. Once ratified, the voidable
contract or deed is deemed valid.‖11
¶15 In making this determination, we ―start with the
presumption that contracts are voidable unless they clearly violate
public policy.‖12 And due to this presumption, the Landowners‘
showing that the covenants13 violate public policy must be ―free
from doubt.‖14
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7 Fitzgerald v. Spearhead Invs., LLC, 2021 UT 34, ¶ 11, 493 P.3d 644.
8 Id. (citation omitted).
9 Id.10 2008 UT 37, ¶¶ 15, 17, 189 P.3d 51.
11 Id. ¶ 18 (citations omitted).
12 Id. ¶ 21.
13―A real estate covenant is a contract . . . .‖ Wise v. Harrington
Grove Cmty. Ass’n, 584 S.E.2d 731, 739 (N.C. 2003).
14 Ockey, 2008 UT 37, ¶ 21 (citation omitted).
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WDIS v. HI-COUNTRY ESTATES
Opinion of the Court
¶16 The Landowners argue, although they do not brief the issue
extensively, that the presumption does not apply here because it
arises from parties‘ freedom to contract and that in this case, ―the
protective covenants at issue were not contractual‖ because ―they
did not involve two parties agreeing to perform acts in relation to
each other.‖ We conclude that applying the presumption is
appropriate.
¶17 We acknowledge that the covenants at issue here differ from
a traditional contract in that, initially, they were unilaterally
imposed. But even under these circumstances, the freedom to
contract is implicated because the question we are resolving is
whether parties ―of full age and competent understanding‖15 are free
either to accept or reject those covenants later on. And there are
other reasons, beyond the freedom of contract, to apply the
presumption.
¶18 For one, voiding the covenants ab initio is a severe remedy.
As long as the party affected by a defective covenant is free either to
ratify or reject such a covenant, it is usually unnecessary for the court
to make that decision for her by voiding it altogether. And because
simply declaring the covenant voidable will normally be an
adequate remedy, the covenant should clearly violate public policy
before we declare it absolutely void. That is why we have applied
the presumption even where the contract at issue was entered for a
fraudulent purpose.16
¶19 Another reason for applying the presumption is that voiding
even defective covenants will upset certain reliance interests. And in
some cases, like this one, where the covenants have existed for
decades, those interests may be especially substantial.
¶20 Having explained why the presumption of voidability
applies, we turn to whether the Landowners have overcome it. In
Ockey, we held that the unauthorized conveyance of a property
interest was merely voidable.17 In making that determination, we
noted first that no statute had declared the type of transaction
absolutely void as against public policy, and second, the
_____________________________________________________________
15 See id. (citation omitted).
16See Wittingham, LLC v. TNE Ltd. P’ship, 2020 UT 49, ¶¶ 8, 25, 469
P.3d 1035.
17 2008 UT 37, ¶¶ 24–25.
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unauthorized transfer affected only the rightful owner—not the
general public.18
¶21 Later, in Wittingham, LLC v. TNE Limited Partnership, we
characterized our observations in Ockey as a two-factor test for
―determining whether a contract clearly violates public policy.‖19
The test asks ―(1) whether the law or legal precedent has declared
that the type of contract at issue is ‗unlawful‘ and ‗absolutely void,‘
and (2) whether ‗the contract harmed the public as a whole—not just
an individual.‘‖20
¶22 We discuss each factor in turn and hold that the restrictive
covenants at issue are voidable, not absolutely void, and affirm the
district court.
A. The Statutes and Caselaw Cited by the Landowners Do Not Evince a
Clear Public Policy Declaring the Restrictive Covenants Absolutely Void
¶23 The Landowners argue that three sources of public policy
make the restrictive covenants at issue absolutely void. These are
(A) the WLA, (B) the statute of frauds, and (C) Utah caselaw. Below,
we explain why we disagree with the Landowners‘ conclusions
about each source of law.
1. The Wrongful Lien Act Is Not a Source of Public Policy
Compelling Us to Declare the Covenants Void Ab Initio
¶24 The first statute the Landowners cite as a source of public
policy is the WLA. They argue that the WLA ―confirms that an
encumbrance is void if it is not signed by the owner.‖ The Act
defines a wrongful lien to include ―any document that purports to
create . . . [an] encumbrance on an owner‘s interest in certain real
property‖ if it is not expressly authorized by statute, authorized by a
court, or ―signed by . . . the owner of the real property.‖21 And it
directs courts to declare wrongful liens ―void ab initio.‖22 So, the
Landowners argue, because the restrictive covenants are
_____________________________________________________________
18 Id. ¶ 24.
19 2020 UT 49, ¶ 24 (footnotes omitted) (quoting Ockey, 2008 UT
37, ¶ 23).
20 Id.21 UTAH CODE § 38-9-102(12).
22 Id. § 38-9-205(5)(a).
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WDIS v. HI-COUNTRY ESTATES
Opinion of the Court
―encumbrances‖ that were not authorized by a document signed by
the owners of the encumbered land, they are void ab initio.
¶25 We disagree. Although a restrictive covenant could be
considered an encumbrance, we are not convinced it is the sort of
encumbrance contemplated by the WLA. An ―encumbrance‖ may be
defined broadly as ―any property right that is not an ownership
interest.‖23 Thus defined, an encumbrance may well include a
restrictive covenant because neighboring property owners have the
―property right‖ to enforce such a covenant. But the term may also
be defined more narrowly as a ―claim or liability that is attached to
property . . . that may lessen its value, such as a lien or mortgage.‖24
The latter definition is less likely to include a restrictive covenant.
And it is also the definition we find more applicable to the WLA.
¶26 The WLA, as its name suggests, is focused on liens, not on all
nonpossessory property interests. A ―lien‖ is generally understood
to be a ―legal right or interest that a creditor has in another‘s
property, lasting [usually] until a debt or duty that it secures is
satisfied.‖25 This comports more closely with the narrow ―claim or
liability‖ definition of ―encumbrance‖ than it does with the broader
―property right‖ definition.
¶27 Given the Act‘s focus on liens and the different definitions of
―encumbrance,‖ it is at least ambiguous whether the WLA would
apply to restrictive covenants. And where such ambiguity exists,
―we read the statute in harmony with other statutes under the same
and related chapters.‖26 The WLA is codified under Title 38 of the
Utah Code, the subject of which is ―Liens.‖ There are many types of
liens addressed in the thirteen chapters of Title 38—everything from
construction liens to airline liens—but neither covenants, generally,
nor restrictive covenants, specifically, are ever mentioned.
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23 Encumbrance, BLACK‘S LAW DICTIONARY (11th ed. 2019).
24 Id.; see also Encumbrance, MERRIAM-WEBSTER DICTIONARY,
https://www.merriam-webster.com/dictionary/encumbrance (last
visited Apr. 14, 2022) (defining ―encumbrance‖ as ―a claim (such as a
mortgage) against property‖).
25Lien, BLACK‘S LAW DICTIONARY (11th ed. 2019) (emphasis
added).
26 Wittingham, 2020 UT 49, ¶ 26 (citation omitted) (internal
quotation marks omitted).
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¶28 In short, we cannot say that an Act directed at wrongful liens
―provides a well-defined and dominant public policy supporting the
conclusion‖ that restrictive covenants not signed by the proper
landowners are void.27 Even if the Landowners are correct that the
restrictive covenants at issue are encumbrances that technically fit
within the WLA‘s definition of ―wrongful lien,‖ such a conclusion is
not ―free from doubt,‖ for the reasons we have identified.28
¶29 Additionally, we agree with the district court‘s conclusion
that ―the mere fact the 1980 Covenants may be ultimately
determined to be invalid does not necessarily make them wrongful
or void ab initio under the Act.‖ Under the Act‘s definition of
―wrongful lien,‖ a lien is not wrongful if it is ―expressly authorized‖
by statute.29 In Hutter v. Dig-It, Inc., we interpreted the meaning of
the phrase ―expressly authorized‖ as used in the WLA.30 There, the
appellees argued that a mechanic‘s lien imposed in violation of the
requirements of the Mechanic‘s Lien Act was a ―wrongful lien‖
under the WLA. They reasoned that ―an unenforceable lien cannot
be expressly authorized by statute.‖31 We disagreed, holding that the
phrase ―not expressly authorized by . . . statute‖ ―does not include
statutorily created liens,‖ even where such liens are invalid and
unenforceable under the statute that governs the lien.32 So we
determined that because the type of lien at issue was authorized by
the Mechanic‘s Lien Act, it could not be a ―wrongful lien‖ under the
WLA, even though it was ultimately unenforceable. The
Landowners‘ arguments in this case ignore Hutter‘s holding. Even
though, as the Landowners point out, no statute ―allows protective
covenants to become valid if they are signed without the
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27 Id. ¶ 27.
28 See id. ¶ 25.
29 UTAH CODE § 38-9-102(12).
30 2009 UT 69, ¶¶ 46, 49, 219 P.3d 918.
31 Id. ¶ 46. This is similar to the Landowners‘ argument in this
case that, although the Community Association Act authorizes the
recording of restrictions in HOA boundaries, it does not authorize
restrictions that are not signed by the proper landowners—so such
restrictions cannot be authorized under the WLA.
32 Id. ¶ 52.
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Opinion of the Court
landowner‘s knowledge or consent,‖ the fact that a statute allows
them at all removes them from the WLA‘s purview.33
¶30 For the reasons we have articulated, the WLA does not
provide ―a well-defined and dominant public policy supporting the
conclusion that the type of contract at issue in this case is void.‖34
2. The Statute of Frauds Is Not a Source of Public Policy Compelling
Us to Declare the Covenants Void Ab Initio
¶31 The Landowners next argue that the statute of frauds,
particularly Utah Code sections 25-5-1 and 25-5-3, expresses a clear
public policy that ―conveyances and encumbrances that are not
signed by the owner are unlawful and absolutely void.‖ We
disagree. The statute of frauds does not lead to a conclusion ―free
from doubt‖ that all conveyances and encumbrances not signed by
the property owner are completely void and incapable of ratification.
This is so for two reasons. First, the primary purpose of the statute of
frauds is evidentiary—to require that certain important agreements
be evidenced by a writing and signed by the person being charged
with the agreement. Its purpose is not to make all unsigned contracts
regarding property rights absolutely void. And second, the statute of
frauds contains several exceptions, which fact cuts against the
Landowner‘s assertion that the statute of frauds declares the
restrictive covenants at issue completely void and incapable of
ratification.35
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33 We agree with the Landowners that the ultimate question we
must answer is not whether all restrictive covenants are absolutely
void, but whether they ―are absolutely void if they were entered into
without the property owner‘s knowledge or consent.‖ But because
the Landowners invoke the WLA, we must analyze that question in
light of the WLA as it has been interpreted. And the WLA simply
does not apply to categories of liens or encumbrances that have been
authorized by statute generally, even where the specific
encumbrance at issue is defective under the authorizing statute.
34 Wittingham, 2020 UT 49, ¶ 27.
35 When discussing the statute of frauds issue, the district court
assumed that the restrictive covenants do not comply with the
statute. For purposes of this opinion we also assume, without
deciding, that the restrictive covenants do not comply with the
statute of frauds.
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¶32 The Landowners point to Utah Code sections 25-5-1 and 25-
5-3, claiming that these sections render the restrictive covenants
void. Utah Code section 25-5-1 states, in relevant part, that ―[n]o
estate or interest in real property . . . shall be created, granted,
assigned, surrendered or declared otherwise than . . . by deed or
conveyance in writing subscribed by the party creating, granting,
assigning, surrendering or declaring the same.‖ Similarly, Utah Code
section 25-5-3 states that ―[e]very contract . . . for the sale, of any
lands, or any interest in lands, shall be void unless the contract, or
some note or memorandum thereof, is in writing subscribed by the
party by whom the . . . sale is to be made.‖ These two provisions
establish a general rule that for agreements regarding interests in
real property, the agreement must be evidenced by a writing that is
signed by the person against whom the agreement is being enforced.
¶33 The purpose of the statute of frauds is not, as the
Landowners argue, to completely void all agreements not signed by
the owner of real property. The statute‘s ―primary purpose . . . is
evidentiary, to require reliable evidence of the existence and terms of
the contract and to prevent enforcement through fraud or perjury of
contracts never in fact made.‖36 The high evidentiary standard of the
statute of frauds demonstrates the legislature‘s judgment that ―it is
preferable to invalidate a few otherwise legitimate agreements
because they were not written than to burden the system and the
citizenry with claims premised on bogus, unwritten agreements.‖37
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36 RESTATEMENT (SECOND) OF CONTRACTS § 131, cmt. c (AM. L. INST.
1981); see also Martin v. Scholl, 678 P.2d 274, 275 (Utah 1983) (stating
that the purpose of the statute of frauds is to impose ―a high
evidentiary standard by which oral real estate contracts must be
proved to qualify for a specific performance‖ (citation omitted));
Guinand v. Walton, 450 P.2d 467, 469 (Utah 1969) (―The purpose of the
statute [of frauds] is that certain matters of great importance such as
the conveyance of real estate should be protected against frauds and
perjuries.‖).
37Coleman v. Stuart, 2019 UT App 165, ¶ 36, 451 P.3d 658 (citation
omitted). The Landowners cite this language as ―conclusively
establish[ing] that the protective covenants here are void ab initio
under Ockey.‖ But that is not what Coleman says. The cited language
merely recognizes that, in instances where the statute of frauds is
applied, some otherwise legitimate unwritten agreements will not be
enforced due to lack of evidence.
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Opinion of the Court
Given this largely evidentiary purpose of the statute of frauds, we
cannot say that the statute proclaims a clear public policy that all
encumbrances and conveyances not signed by the property owner
are absolutely void.
¶34 In addition to the statute of frauds‘ evidentiary purpose, the
fact that the statute contains several exceptions also weighs against a
finding that the statute evinces a public policy that all non-
complying contracts are void ab initio. One of these exceptions,
which allows a court to grant specific performance of non-complying
contracts in the case of part performance, is embedded in the statute
of frauds itself at Utah Code section 25-5-8.38 The fact that a court
may enforce a non-complying contract when the parties have
partially performed their obligations undermines the conclusion that
all conveyances and encumbrances not signed by the property
owner are void.
¶35 It is also possible for an agreement that violates the statute of
frauds to become enforceable through estoppel.39 We find the
estoppel exception particularly important because, for purposes of
the void/voidable issue, the doctrines of ratification and estoppel are
closely related.40 Indeed, we fail to see a meaningful distinction
between a party‘s being able to ratify an otherwise unenforceable
agreement and a party being estopped from contesting the
enforceability of an agreement in litigation. In both cases, the party‘s
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38Three elements must be met for the part performance exception
to apply: (1) ―the oral contract and its terms must be clear and
definite;‖ (2) ―the acts done in performance of the contract must be
equally clear and definite;‖ and (3) ―the acts must be in reliance on
the contract.‖ Randall v. Tracy Collins Tr. Co., 305 P.2d 480, 484 (Utah
1956).
39 Fericks v. Lucy Ann Soffe Tr., 2004 UT 85, ¶ 14, 100 P.3d 1200(―[T]o establish the promissory estoppel exception to the statute of
frauds, [t]he acts and conduct of the promissor must so clearly
manifest an intention that he will not assert the statute that to permit
him to do so would be to work a fraud upon the other party.‖
(second alteration in original) (citation omitted) (internal quotation
marks omitted)).
40See Ockey, 2008 UT 37, ¶ 22, (noting that the difference between
a void contract and a voidable contract is whether the contract
―could become enforceable by ratification or estoppel‖).
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conduct renders the otherwise unenforceable agreement
enforceable—something that could not occur if the agreement was
void ab initio.41
¶36 The fact that a party can waive a statute of frauds defense
also cuts against the public policy identified by the Landowners.
There are several ways a party can waive a statute of frauds defense,
including by (1) failing to plead the statute as an affirmative defense;
(2) admitting the existence of the agreement in the pleadings; and
(3) admitting at trial the existence and all essential terms of the
contract.42 The fact that a party can be bound by a non-complying
agreement by admitting its existence during litigation is
incompatible with a conclusion that a non-complying agreement is
void ab initio and incapable of ratification. If a non-complying
contract is void ab initio, then it is unenforceable in all
circumstances.
¶37 The Landowners, recognizing the implications of the
exceptions to the statute of frauds, argue that while ―some
documents that violate the statute of frauds may be voidable‖ under
the exceptions, the covenants here are void because none of the
exceptions apply in this particular case. But whether an exception
applies in this case is irrelevant in determining whether the statute of
frauds evinces a clear public policy that the restrictive covenants are
void ab initio. When searching a statute for legislative declarations of
public policy, we look only at the ―type of contract at issue‖ and see
if the legislature has declared that type of contract to be unlawful
and absolutely void.43 We do not apply the statute directly to the
_____________________________________________________________
41 Our conclusion regarding estoppel is also consistent with
Wittingham. In that case, the issue was whether a contract entered
into by the partner of a dissolved partnership was void or voidable.
2020 UT 49, ¶¶ 5–7, 22. Though the statute at issue did not give the
partner actual authority to bind the partnership to the contract, id.¶¶ 29–30, we found that the contract was merely voidable, in part,
because the statute incorporated a partnership by estoppel
exception. Id. ¶ 34.
42 See Bentley v. Potter, 694 P.2d 617, 621 (Utah 1984) (―The statute
of frauds is a defense that can be waived by a failure to plead it as an
affirmative defense, admitting its existence in the pleadings, or
admitting at trial the existence and all essential terms of the
contract.‖ (citations omitted)).
43 Wittingham, 2020 UT 49, ¶ 26.
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Opinion of the Court
specific contract at issue in the case. So we reject the Landowners‘
request to have us consider whether any of the exceptions to the
statute of frauds apply to the restrictive covenants.44
¶38 Because the statute of frauds serves mainly evidentiary
purposes, and because the statute contains several exceptions that
allow non-complying contracts to become enforceable, we conclude
that the statute does not evince a clear public policy that the
restrictive covenants here are absolutely void and incapable of
ratification.
3. Utah Caselaw Includes No Public Policy Compelling Us to Declare
the Covenants Void Ab Initio
¶39 Finally, the Landowners argue that caselaw from this court
and the court of appeals confirms that restrictive covenants not
signed by the proper landowner are absolutely void. Although
judicial opinions, like statutes, may be an independent source of
public policy for holding contracts void ab initio,45 we do not find
such a policy clearly established in our caselaw.
¶40 Of the cases cited by the Landowners, perhaps the one that
comes closest to articulating the public policy they would have us
find is Gunnell v. Hurst Lumber Co.46 There, a set of restrictive
covenants ostensibly applying to several contiguous parcels of
property was not signed by the owner of one of the parcels. 47 When
the plaintiffs in Gunnell sued for a declaratory judgment that the
subsequent landowner was subject to the restrictions, we affirmed
the district court‘s contrary determination, citing the statute of
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44 In Wittingham, for instance, we did not decide whether any of
the exceptions listed in the relevant statute actually applied to the
contract at issue. Instead, we decided that the exceptions to the
statute suggested ―the existence of a general public policy‖ that was
inconsistent with a finding that the statute ―served as a legislative
declaration that the type of contract at issue‖ in the case was
unlawful and absolutely void. Id. ¶ 34.
45Id. ¶ 24 (explaining that the first Ockey factor is ―whether the
law or legal precedent has declared that the type of contract at issue is
‗unlawful‘ and ‗absolutely void‘‖ (emphasis added) (citing Ockey,
2008 UT 37, ¶ 23)).
46 515 P.2d 1274 (Utah 1973).
47 Id. at 1274.
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frauds and stating that if the plaintiffs had wanted the land to be
under the restrictive covenants, ―they should have had [the owner]
sign the document.‖48
¶41 As the Landowners point out, the facts of Gunnell are similar
to those in this case, including the fact that the subsequent
landowner in Gunnell was aware of the covenants when it purchased
the property.49 But although we held that the specific covenants at
issue in Gunnell were unenforceable, we stopped short of
―declar[ing] that the type of contract at issue [was] ‗unlawful‘ and
‗absolutely void.‘‖50 Because a statement of public policy must be
clear and ―free from doubt,‖51 a case in which we invalidated
particular restrictive covenants without a broader statement that
such covenants are categorically void and incapable of ratification is
insufficient.52
¶42 This insufficiency is also present in Thompson v. Capener,53
also cited by the Landowners. There, the court of appeals applied the
statute of frauds to invalidate covenants that were signed by only
one of two owners.54 But the court also examined whether the non-
signing owner had ratified the covenants.55 And although the owner
had not ratified the covenants under the facts of that case, the court,
by undertaking the ratification analysis acknowledged that
ratification was possible.56 Accordingly, the Landowners cannot rely
upon Thompson as a source of public policy invalidating all unsigned
restrictive covenants.
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48 Id. at 1274–75.
49 Id. at 1274.
50 See Wittingham, 2020 UT 49, ¶ 24 (emphasis added).
51 Id. ¶ 25.
52In Gunnell, we did state that knowledge of the covenants on the
part of the subsequent landowner was ―immaterial.‖ 515 P.2d at
1275. Although this suggests that the subsequent landowner‘s
knowledge was insufficient to ratify the covenants, it does not
suggest that unsigned covenants are never capable of ratification.
53 2019 UT App 119, 446 P.3d 603.
54 Id. ¶¶ 2, 20.
55 Id. ¶¶ 8, 16.
56 Id. ¶ 16.
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Opinion of the Court
¶43 Similarly, the other cases the Landowners cite do not include
the clear public policy they would have us find. In Metropolitan Water
District of Salt Lake & Sandy v. SHCH Alaska Trust, we held only that
the Limited Purpose Local Districts Act did not grant a local district
authority to enact land use regulations.57 And in Salt Lake County v.
Metro West Ready Mix, Inc., we held only that a purchaser of property
is not protected by Utah‘s recording statute if ―he is on notice that
his grantor has no record title to the property conveyed.‖58 These
cases simply do not declare that unsigned restrictive covenants are
absolutely void.59
¶44 The Landowners also cite Grassy Meadows Sky Ranch
Landowners Ass’n v. Grassy Meadows Airport, Inc.60 for the proposition
that ―amendments to protective covenants are void if they were
enacted without authority.‖ There, the court of appeals did uphold
the district court‘s determination that a set of amended restrictive
covenants were ―void ab initio‖ where a development company
sought to enact them after the period for amendments provided by
the original covenants had passed.61 But like the other cases, Grassy
Meadows includes no clear statement of public policy, and its holding
is therefore limited to its facts. Also, though it is clear why the
amended covenants were unenforceable in that case, we are not so
sure the determination that they were void ab initio is correct. In
other words, we do not see why the amended covenants should be
absolutely invalid if it so happened that all the affected landowners
were to agree with the amendments.62
¶45 Finally, the district court astutely noted that ―Utah appellate
courts have repeatedly held‖ that ―other unauthorized or fraudulent
deeds or contracts‖ ―are voidable and may be treated by the injured
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57 2019 UT 62, ¶¶ 15, 47, 452 P.3d 1158.
58 2004 UT 23, ¶¶ 12, 17, 19, 89 P.3d 155.
59The same is true of F.D.I.C. v. Taylor, where the court of appeals
held that a trust deed was ineffective to convey property where title
was held by a corporation and the deed was executed by the person
who controlled the corporation in his individual capacity. 2011 UT
App 416, ¶¶ 3, 27, 267 P.3d 949.
60 2012 UT App 182, 283 P.3d 511.
61 Id. ¶¶ 2, 4, 12.
62 See infra ¶¶ 47–49.
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party as valid.‖63 ―Indeed, if the conveyance of property to a third
party by one who does not have authority to do so is merely
voidable,‖ we, like the district court, are ―unable to find that the
encumbrance of property through the recording of restrictive
covenants by one who does not have authority to do so is void as
against public policy.‖
¶46 For the foregoing reasons, we agree with the district court
that the first Ockey factor weighs in favor of holding the restrictive
covenants voidable, not absolutely void.
B. The Covenants Do Not Harm the Public as a Whole
¶47 Having found no clear statement of public policy in statute
or caselaw that would render the covenants absolutely void, we turn
to the second Ockey factor and examine whether the covenants harm
―the public as a whole.‖64 The district court concluded that because
the covenants potentially harmed ―only those who own lots within
the boundaries of the HOA,‖ they did not harm the public as a
whole.
¶48 The Landowners, who dedicate little ink to this factor in their
briefing, do not convince us otherwise.65 They do suggest that
underlying the authority we examined under the first Ockey factor is
―the well-settled principle that owning land ‗carries with it the right
to exercise dominion and control over it.‘‖66 And they explain that
―[v]iolating this principle harms the public because it calls into
question the fundamentals upon which land ownership is based.‖
¶49 But our decision does not violate this fundamental property
principle. The apparent facts of this case, in which an individual
singlehandedly restricted nearly two thousand acres of land that did
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63(Citing Dillon v. S. Mgmt. Corp. Ret. Tr., 2014 UT 14, ¶¶ 28–29,
326 P.3d 656; Frailey v. McGarry, 211 P.2d 840, 845 (Utah 1949); Ockey,
2008 UT 37, ¶ 26; Wittingham, 2020 UT 49, ¶ 37.)
64 Wittingham, 2020 UT 49, ¶ 24 (citation omitted).
65 The Landowners assert that the first Ockey factor is the ―most
relevant‖ in this case. But courts are instructed to consider both
factors, see id. ¶¶ 24–25, and where, as here, there is no clear
statement of relevant public policy in statute or existing legal
precedent, this second factor would be especially important to the
determination of whether a contract is absolutely void.
66 (Citing Fisher v. Bountiful City, 59 P. 520, 522 (Utah 1899).)
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Opinion of the Court
not belong to him, are extraordinary. But generally speaking, we
cannot see how permitting landowners to ratify restrictive covenants
violates their right to control their land. The Landowners point out
that property owners who wish to be bound by otherwise invalid
covenants could always record new, validly authorized ones. But in
cases like this one, where numerous owners are involved and
decades have passed since the initial recording, it may be
advantageous to avoid such a process. Regardless, the fact that they
retain the right not to ratify an otherwise invalid covenant
adequately secures their property rights.
¶50 The Landowners further contended, at oral argument, that
failing to hold the restrictive covenants absolutely void would
undermine the accuracy of recorded documents, upon which the
public relies. But well-established property doctrines such as adverse
possession and boundary by acquiescence already recognize that
actual property ownership sometimes varies from what is recorded
in the public records. And if property owners who wish to ratify
unauthorized recorded covenants are allowed to do so, then the
public records would not be inaccurate in those instances.
¶51 All told, where we have held certain types of contracts void
for public policy reasons in the past, the potential harm resulting
from such contracts had broad reach.67 The harm in this case—to the
extent there is any—is limited to the landowners subject to the
covenants. So we find that the second Ockey factor, like the first,
weighs in favor of declaring the covenants voidable rather than
absolutely void.
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67 See, e.g., Zion’s Service Corp. v. Danielson, 366 P.2d 982, 985–86
(Utah 1961) (voiding a contract whose purpose and effect was to
control prices and restrain trade in a manner imposing costs on the
public); Hirtler v. Hirtler, 566 P.2d 1231, 1231–32 (Utah 1977) (holding
that contracting parties may not waive the right to assert a statute of
limitations as a defense to an action because such statutes are
designed ―for the public good,‖ and giving effect to waivers would
lead to their insertion in contracts ―as a matter of routine,‖ opening
the door ―to the very abuses the statute was designed to prevent‖);
Hawkins ex rel. Hawkins v. Peart, 2001 UT 94, ¶¶ 10–13, 37 P.3d 1062(holding that it violates public policy to enforce a parent‘s release of
a minor‘s prospective claims for negligence and noting that an
―exculpatory clause that relieves a party from future liability may
remove an important incentive to act with reasonable care‖).
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Conclusion
¶52 We hold that restrictive covenants that are recorded without
the signature of the affected landowner are voidable, not absolutely
void, and they are therefore ratifiable. The WLA, the statute of
frauds, and our caselaw have not declared that such covenants are
categorically void as against public policy. And because they affect
only the individuals subject to them, and not the public as a whole,
we decline to declare them absolutely void. It remains to be
determined whether the Landowners ratified the covenants at issue
in this case. Accordingly, we affirm the district court‘s denial of
summary judgment and remand for further proceedings consistent
herewith.
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